The best trading Psychology.

For
Beginners.

PRESENTED BY
BAHFOREX

Trading psychology is one of the most important aspects of trading, but it is also one of the most
overlooked. In order to become a successful, profitable trader, you must be able to master the
art of trade psychology. But how does one do this?
In order to help you navigate this important subject, we have compiled a list of our top trading
psychology tips in order to help you on your way to becoming a successful trader. Let's get
started!

What is Trading Psychology?

When we speak of trading psychology, we speak of your frame of mind and emotions when
trading. We speak about discipline and being able to master your own mind in order to become
a ruthless trading machine!
It should come as little surprise that emotions can be one of the biggest obstacles in the way of
becoming a successful trader. Fear and greed tend to be the main two which hinder a trader's
progress. Fear of losing another trade, causing you to exit a trade earlier than you should have,
or, maybe, not even opening the trade in the first place. Greed of wanting to make as much
money as possible, causing you to keep a trade open longer than you should or entering trades
which you should not have.
You could develop the best trading strategy in the world, but if you have not got the right
mindset to execute it in a disciplined way, you will never be successful.
Identifying these psychological problems and being aware of them is one thing, overcoming
them is something else entirely. Fortunately for you, we have compiled a list of our top trading
psychology tips to help you out! Whether you want to trade Forex, commodities or stocks, our
tips will help you master your psychology when trading.

1) Create a Trading Plan

Our first tip to help with your trading psychology is to create a trading plan and stick to it
religiously!
The best way to control your emotions when trading is to remove them from the process
completely. Creating a proper trading plan will help you to do this. Make sure you cover
everything, from what signals will prompt you to enter the market, to how much profit you are
targeting on each trade. Once created, resist deviating from it.
This may sound easier said than done, but creating a trading plan and writing it down really can
help you control the emotions generated from trading and do some of your thinking ahead of
time. Whenever you start to feel stressed, fearful or even greedy take a deep breath and refer to
your trading plan.

2) Take Regular Breaks

Whether you are learning to become a trader or trading professionally, it is important to take
breaks regularly. Taking breaks to relax your mind can help ease any emotional strain you may
find yourself under.
This is particularly important after a stressful trading session or a string of losses. When it feels
like your emotions may be starting to get the better of you, just walk away from your trading
terminal and do something different for a while.

3) Don't Quit Your Day Job

The next of our trading psychology tips may sound like a strange one. It is important to bear in
mind that people who trade the financial markets professionally did not just start doing so
overnight. It will take a lot of hard work, learning and practice before you can even think about
earning a salary from trading, if it happens at all. The reality is that most people who start
trading will not go on to reach the kind of levels which would allow them to trade full time.
The reason we are telling you this is that if you start trading with the mindset that you need to be
profitable straight away, it will put a tremendous amount of pressure on you. This pressure will
lead to stress and cause you to make more mistakes.
Having a separate, primary income stream can help your trading psychology as it eliminates the
need to make money quickly. Instead, you know that whatever happens with your trading, you
still have a steady, reliable source of income each month to pay the bills.

4) Accept That You Will Lose

If you want to become a successful trader, one thing you need to know and accept straight away
is that you are going to lose money on some trades!
It might be on every other trade when you start, or every hundredth trade when you are better,
but you will lose money on some trades! Once you accept this, it will make your life a lot easier.
If your last trade was a loss, try not to obsess over it, instead learn from it. What went wrong?
What assumptions did you make that turned out to be inaccurate? What will you do differently
next time? Remember, every loss is an opportunity to learn and to get better.
Concentrate on the next trade. In fact, better yet, concentrate on your next 50 or 100 trades!
You need to realise that trading is not about any single trade, but about all of them together.
Your goal should be consistency over a number of trades as opposed to landing one hugely
profitable one, because, unfortunately, that is incredibly unlikely to happen.

5) Practice, Practice, Practice

It is all very well reading articles and trading psychology tips to help prepare yourself, but the
reality is that the only way you are going to learn to master trading psychology, is by actually
trading.
Therefore, it is important to practice trading so you can experience first hand the emotions you
are trying to overcome. Trading on a demo account will allow you to trade in real life market
conditions without risking your own capital, providing the ideal place for a beginner trader to get
the hang of the financial markets.
Trading psychology aside, practicing is the only way you will ever become successful at
anything, and trading is no exception. Keep practicing on a demo account until you feel
confident and ready to trade the live markets.

6) Use a Take Profit and a Stop Loss

Thanks to your trading plan, you should already know how much profit you are targeting on
each trade and, on the other hand, how much of a loss you are willing to suffer. Cement these
figures in place by using a stop loss and a take profit.
Both of these tools allow traders to set a predetermined price for automatically exiting the
market. As the names suggest, a stop loss allows you to minimise your losses and a take profit
to set yourself a profit target. Once you have set both for your trade, you should not alter them.
Using these tools will make it easier to stop yourself from closing trades either prematurely or
after you should have.
Using a stop loss and take profit is also an important part of risk management when trading.

7) Backtest Your Trading Strategy

It is perfectly normal to feel nervous if you do not feel confident about the trading strategy you
are using. Aside from practicing on a demo account, backtesting a trading strategy is a good
way to see how effective it is.
Backtesting involves looking at how your trading strategy would have fared in the past, when it
would have been successful and, perhaps more importantly, when it would not have been.
You can either backtest your strategy manually or by using specially designed software.
Manually backtesting involves scrolling back through price charts on the instrument you want to
trade and identifying signals that would have prompted you to enter the market and what
subsequently happened. You can record all this data in an excel file to make it easier to analyse
once you have finished.
Alternatively, using backtesting software would involve teaching a computer program your
trading strategy in order that it can automatically analyse price history on your behalf.
For beginner traders, manually backtesting is probably more appropriate. It is an effective way
to train your mind to recognise the chart patterns which you are trying to identify, hopefully
resulting in this process becoming more natural to you.

Trading Psychology Tips - Final Thoughts

Psychology is an integral part of trading the financial markets. Trading can be an anxious,
emotional experience and it is not unnatural for these feelings to sometimes get the better of us
and get in the way of rational thinking, it happens to everybody.
However, if you want to succeed in trading, you must learn how to control these emotions and
eliminate them from your trading decisions as much as possible.

Noticing your emotions, being aware of them, is the first challenge. Whenever you find yourself
reacting to events, or making important trading decisions, ask yourself "how am I feeling?" and
then, "how is that affecting my thinking?". You want to avoid being too exuberant, angry, fearful,
upset, greedy and so on.
Recognising and managing your emotions is difficult at first but after a while it will become
second nature. If you follow the trading psychology tips we have discussed here, it will stand
you in good stead to master this art.

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